FirstGroup reports 80% hike in annual profits

Aberdeen-based group said it delivered margin improvement in its First Student and UK Bus operations last year and First Transit and UK Rail “outperformance” offset lower demand in its US Greyhound interstate bus operation

Shares in transport giant FirstGroup rose more than five per cent after the group reported an 80 per cent increase in statutory pre-tax profits to £105.8 million for the year to March.

The Aberdeen-based group said it delivered margin improvement in its First Student and UK Bus operations last year and First Transit and UK Rail “outperformance” offset lower demand in its US Greyhound interstate bus operation.

However the group reports revenues dipped 9.9 per cent to £6.05 billion in the 2015 year to March, though First said the overall figure reflects, “rail franchise changes, non-recurrence of revenues from UK bus operations sold or closed in the prior year and foreign exchange translation”.

FirstGroup said on an underlying basis, excluding those factors, revenues were up 4.1 per cent.

Movements in foreign exchange rates cost the group £31.7 million in the year compared with a gain of £68.2 million in 2014.

The group also notes UK rail franchise subsidy receipts totalled £33.3 million in the year (2014: £572.1 million), with no UK rail revenue support booked for the year against £237 million in 2014.

Revenues from the UK rail division dipped to £2.2 billion for the year, down from £2.87 billion in 2014.

The group announced in March it had secured an extension to operate the Great Western rail franchise until at least 2019.

First had indicated in 2011 it would drop the Great Western franchise after 2013 - three years early - to avoid paying more than £800 million in premiums to the Treasury, though the group had indicated it would bid for the next Great Western franchise.

First Group also recently secured a one-year extension to run the Transpennine Express service which links Manchester, Liverpool and Leeds with Glasgow and Edinburgh.

The group notes full-year revenues from its First Student division edged up marginally to £1.48 billion (2014: £1.46 billion); First Transit revenues rose to £844.8 million (2014: £811.9 million); Greyhound revenues dipped to £609.6 million (2014: £624.6 million); and UK bus revenues dropped to £896.1 million 2014: £930.2 million).

First Group also notes “adverse developments” linked to two separate legal claims made against former entities of US transport group Laidlaw, which FirstGroup acquired in a $3.5 billion deal in 2007.

The cases which relate to legal claims which pre-date FirstGroup's acquisition, “will cost significantly more to settle”, and the group has booked a charge of £12.2 million (2014: nil).

The group has also booked a £25.3 million (2014: nil) gain on disposal for the sale of a Greyhound garage in Miami, Florida.

Chief Executive Tim O'Toole anticipates strong progress in the group's non-rail business in the 2015/16 year, “driven mainly by the ongoing turnarounds of First Student and UK Bus, to largely offset the substantially lower contribution from UK Rail as a result of the end of the First ScotRail and First Capital Connect franchises”.

He added: “We were awarded a contract to operate First Great Western for up to four and a half more years, and will continue to work closely with the Department for Transport and Network Rail to deliver the £7.5 billion Great Western Mainline modernisation programme to at least March 2019.

“We have also signed an agreement to run First TransPennine Express through to 1 April 2016, and recently submitted our bid to operate the franchise beyond that date.”

FirstGroup chairman, John McFarlane, added: “In the year the Department for Transport (DfT) awarded us a contract to continue operating our largest rail franchise, First Great Western, to at least March 2019, and a contract to run First TransPennine Express for an additional year.

“We were disappointed not to secure the renewal of the First ScotRail franchise, and were unsuccessful in four other bids but these were awarded at economic levels that were unacceptable to us.

“We were and will remain disciplined in our approach to bidding for these significant contracts.

“Overall, the Group is broadly where we expected to be at this stage of the transformation plan, and has begun to demonstrate the improvements in financial performance that were clearly required.”

FirstGroup, which was forced to raise £615 million in 2013 from a rights issue after a slump in profits, said it ended the 2015 year with debts, excluding accrued bond interest, of £1.4 billion (2014: £1.3 billion).